Mozambique Continues Monetary Policy Loosening

The Bank of Mozambique cut its main policy rate by 25 basis points to 9.25% at its first meeting of 2026, extending an easing cycle that began in 2024 and taking borrowing costs to their lowest level since 2015. The decision was supported by expectations that inflation will remain in single digits over the medium term, despite rising risks and uncertainties, particularly from recent flooding and elevated trade and geopolitical tensions. Mozambique’s inflation rate slowed to 3.23% in December from 4.38% in November, marking its lowest level in 13 months and staying in line with the central bank’s single-digit inflation target. However, inflation is expected to pick up later this year, driven by some monetary financing of the budget deficit, the restart of major LNG construction projects, and the possibility of a metical devaluation.

The Central Bank of Mozambique cut its key MIMO interest rate by 25 bps to 9.5% on November 14, 2025, the lowest since November 2015, marking the 12th consecutive rate reduction. The decision largely reflects continued expectations of single-digit inflation in the medium term, despite concerns over delays in public debt payments. Policymakers noted that the annual inflation rate in Mozambique eased only slightly to 4.8% in October 2025, from 4.9% in the prior month. Meanwhile, the central bank warned that risks and uncertainties surrounding inflation projections remain high. "In the medium term, beyond the impacts of climate shocks and the slow recovery of productive capacity and supply of goods and services, delays in the government’s payment of domestic public debt instruments represent a significant concern.”, said Governor Rogério Zandamela.

The Central Bank of Mozambique slashed its key MIMO interest rate by 50 bps to 10.25% on September 29, 2025, marking the 11th consecutive rate reduction. This decision largely reflects expectations of single-digit inflation in the medium term, supported by a stable exchange rate and favorable international commodity prices, despite significant domestic risks and uncertainties. The central bank also said the MPC would continue to "normalize" the level of its benchmark rate, presumably at a moderate pace. The annual inflation rate in Mozambique quickened to 4.79% in August 2025, the steepest increase since November 2023, from 3.96% in July. Regarding growth, a gradual recovery in economic activity is expected over the medium term, excluding LNG production, partly supported by planned projects in strategic sectors.